Question

During Burns Company's first year of operations, credit sales totaled $140,000 and collections on credit sales totaled $105,000. Burns estimates that bad debt losses amount to 1.5% of account receivables. By year-end, Burns had written off $300 of specific accounts as uncollectible. 

Required: 

1.Prepare all appropriate journal entries relative to uncollectible accounts and bad debt expense.

2. Show the year-end Statement of Financial Position presentation for accounts receivable.

Answer 1

Prepare all appropriate journal entries relative to uncollectible accounts and bad debt expenses.

Burns estimates that bad debt losses will be 1.5% of credit sales. If you're using the percentage of credit sales method, you ignore the existing balance in the AUA account.

Accounts and Explanations	Debit	Credit
Bad debt expense 2,100($140,000 xx1.5%)	2,100
Allowance for uncollectible accounts		2,100
(To record the allowance for the uncollectable)
Allowance for uncollectible accounts	300
Accounts receivable		300
( To record the write off of uncollectable)

Show the year-end balance sheet presentation for accounts receivable.

Accounts receivable 34,700(35,000-300)

less Allowance for uncollectible accounts 1,800(2,100-300)

Net Accounts receivable $32,900.

Answer 2

Journal entry

No	Transaction	General Journal	Debit	Credit
1	1	Allowance for doubtful accounts	300
		Account receivable		300
2	2	Bad debt expense (140000*1.5%)	2100
		Allowance for doubtful accounts		2100

Balance sheet presentation

Current assets
Account receivable	34700
Less: Allowance for doubtful accounts	-1800	32900

Answer 3

Journal entries:
S.no.	Accounts title and explanations				Debit $	Credit $
a.	bad debts expenses Dr. (140000*1.5%)				2100
	Allowance for doubtful accounts					2100
b.	Allowance for doubtful accounts Dr.				300
	Accounts receivable					300
Accounts receivable (Gross balance)
Credit sales				140000
Less: Collections				-105000
Lless: Amount written of				-300
Accounts receivable (Gross balance)				34700
Allowance:
Bad debts expenses			2100
Less: written off			300
Allowance balance			1800
Balance Sheet:
Accounts receivable (Gross)			34700
Less: Allowance			1800
Accounts receivable (Net)			32900